Scallop Fishing and Marketing Act Free Assignment on Business Law

Question: Discuss about the Scallop Fishing and Marketing Act for Business Law. Answer: 1. In this case, Bob Beech is involved in commercial fishing and he is a scallop fisherman. However, a quota system has been introduced by the Scallop Fishing and Marketing Act. According to the new system, each fisherman will be able to catch only 50 tons of scallop in a single year. The new Act also provides that it will be an offense if a fisherman catches more than 50 tons of scallops and in this regard, a fine of $100,000 has also been described by the Act for each offense. Under these circumstances, Bob's daughter Alice advises him that he will be able to double his catch if he incorporates a company. The reason behind this advises that under the eyes of law, a company is considered as having its own distinct identity and as a result, the company will also be allowed its own quota of scallops. Therefore in this question, it has to be decided if the advice given by Bob's daughter Alice is correct. As mentioned above, the issue in this version is based on the doctrine of separate legal identity of the companies. The basis for this doctrine was provided by the court after its decision given in Salomon v Salomon (1897). While delivering the decision in this case, the court has stated that a duly registered company will be treated by the law as a separate entity and therefore, the identity of the company will be different from members. The result was that the property owned by the company needs to be considered as the property belonging to the company itself and not as the property of the members of the company. It can also be said that in such a case, the liabilities of the company can be enforced only against the corporation and not against its members. Therefore, the effect of this doctrine is that the shareholders of a company will not be liable personally even if the company becomes insolvent (Pentony et al., 2014). As a result, in case the company becomes insolvent, the loss suffered by the shareholders will be limited to the amount invested by the shareholders in the company. As mentioned above, it has been created provided by the corporations law that a company has its own separate identity. But they can be set in cases where the court may be of the opinion that this corporate veil should be lifted and the court should look beyond this legal identity. Hence in such a case, it may be decided by the court that it will look beyond the legal fiction it provides that a company has its own separate identity. The term that is used for this purpose is known as piercing the corporate veil. This term describes the circumstances under which it is decided by the court that in a particular case, the doctrine of the separate legal entity should be ignored by the courts (Baxt, 1991). Therefore, that the court decides to lift the corporate veil, the court looks behind the corporate structure for the purpose of applying any right or duty to the members, even if in such a case, if the legal fiction of separate legal entity is applied strictly, such right or duty can be en forced against the company only and not against the members (Campbell, 1960). Therefore, when the court has decided to pierce the corporate veil, it is available to the court to look beyond the veil and impose any liability of the company on its members. But it should be mentioned at this point that only in exceptional circumstances, the court should decide to piercing corporate veil as a general rule provides that mostly it is not available to the court toward the members of the company personally liable for the debts and obligations of corporation (Crosling and Murphy, 2009). On the basis of the legal decision that has been mentioned above, it can be said that in this case also, it has been provided by the Scallop Fishing and Marketing Act that each fisherman will be able to catch and sell only 50 tons of scallops in a single year. However, Bob Beech wants to know if he can make more money as he has the capacity to catch more scallops. For this purpose, advice was given by his daughter Alice that Bob may be able to double his catch if the decides to incorporate a company. Alice believes that in such a case, the company formed by Bob will be considered as distinct legal entity and therefore it will have its own quota of scallops to catch in a single year. However, the effect of the doctrine of piercing the corporate veil is that if a company has been formed with a view to evade the liability of its members, it may be decided by the court that the corporate bail should be pierced and liability should be imposed on the members of the company. Therefore, if t he company formed by Bob is merely a facade, the court may decide that the corporate veil needs to be lifted and liability should be imposed on Bob. Hence, Bob cannot double his catch even if he incorporates a company. 2. The issue in this question has arisen on the basis of the fact that Nuclear Blast Sounds Pty Ltd was one of the subsidiary companies of New Nirvana Ltd. Nuclear Blast Sounds at the responsibility to set up sound at the rock concerts but at a recent concert, due to the negligence of Nuclear Blast Sounds, the sound level was set too high. As a result of this negligence, five audience members suffered permanent hearing loss. But when these persons decided to bring a claim against the subsidiary company, they came to know that this company does not have any funds to pay the likely damages and moreover, it does not have any negligence insurance. The result was that these persons want to know if they can bring a claim against the parent company, New Nirvana Ltd as it was in a better position to pay the likely damages that may be awarded by the court. In this regard, it also needs to be noted that according to the law, each company is considered to be having its own distinct legal identi ty. The corporations law provides that each company has legal identity under the law. Therefore, a corporate veil is present separating the company from its members. Therefore the principal that was provided in Salmon's case is applicable but there can be certain circumstances where the court may decide that the distinct legal entity needs to be ignored and the corporate veil should be pierced. Therefore in case of a group of companies, sometimes the court may decide that the doctrine of the distinct identity of a corporation may not be followed and consequently, the court may pierce the corporate veil for the purpose of considering the economic realities that were related with such a group of companies. For example, such a case happened in D.H.N. food products Ltd. V. Tower Hamlets (1976). It was decided by the court that in a particular case, it is available to the court to ignore the doctrine of separate entity if it will be considered as just and equitable. Therefore the court of app eal was of the opinion that in this case, the corporate veil should be pierced in case of a group of companies. There were three subsidiary companies that the court considered as being a part of the same economic entity and therefore, these companies were held by the court as being entitled to compensation (Baxt, 1997). But it needs to be noted that the general rule is that each company, that is a part of the group, is to be considered as a distinct entity. Therefore, there can be circumstances where it may be the opinion of the court that will not be appropriate that the corporate veil should be lifted in a particular case. An example of such a case can be given in the form of Adams v Cape Industries (1990). The matter in this case was related with a foreign judgment delivered against the company. While deciding the case, the court stated that each company that is a part of the group needs to be considered as a separate entity. It has also been stated that in case of a group of companies, the basic principle that is applicable in this case is that each company of the group needs to be treated as a separate entity. But as mentioned above, sometimes the court may decide that this principle should be ignored and the corporate veil can be lifted for imposing the liability of the subsidiary company on t he parent company. In the present case, Nuclear Blast Sounds Pty is a subsidiary company of New Nirvana Ltd. But only on this ground, the liabilities of Nuclear Blast Sounds cannot be enforced against New Nirvana Ltd. it has to be established that the subsidiary company was completely under the control of its parent company, New Nirvana Ltd. 3. In this part of the assignment, the issue is related with the clause of the constitution of Millenium Pty Ltd. It has been mentioned in the constitution that Don well act as the company solicitor for any land deals entered into by the company. Similarly, there is another clause which provides that if a dispute arises between the company and any of its members, such dispute should refer to an arbitrator before any of the parties decides to initiate proceedings in a court of law. Therefore that the circumstances, the other two members of the company, Simon and Michael decide that Don should be removed from his position as company solicitor and another person should be appointed in his place. Aggrieved by this decision, Simon decides to initiate proceedings in the court. Hence the issue is if the first clause can be enforced by Don and he will remain the company's solicitor. Similarly, it also needs to be seen if the cause which provides that for starting taking the matter to the cou rt, the issue should be brought before an arbitrator can be applied in this case and the proceedings started by Don can be stayed. The provision of the Corporations Act that deals with this issue is section 140. The section mentions that the company's constitution should be treated as a contract between the members of the company and the company itself; the directors and the company and as a contract created between the members of the company. Therefore the contractual effect of the company's constitution is only limited to these situations. No rights can be claimed by any person in any other capacity. Therefore in Eley v Positive Life Assurance Co Ltd. (1876) , the court stated that even if the Company's constitution provided that Eley will remain the solicitor of the company for a lifetime but this clause cannot be imposed by Eley as the company's solicitor. Another relevant decision is that of Hickman v Kent or Romney Marsh Sheep-breeders Association (1915) where the constitution provided that if a dispute arises between the company or its members, such disputes should be there for them an arbitrator before t he party started proceedings in the court of law. Therefore when Hickman started proceedings directly in the court, these proceedings were stayed on the ground that they amounted to a breach of contract. In the present case also, Don cannot claim to remain the solicitor of Millennium Pty Ltd because it has been mentioned in the constitution of Millennium. On the other hand, the proceedings started by Don can be stayed due to the reason that Don has not referred the dispute to an arbitrator before taking recourse to legal action. References Baxt R, (1991) Ultra Vires Has it Been Revived? 1 Company and Securities Law Journal 101 Baxt R, (1997) Should Third Parties Have to Inquire About the Ability of Directors to bind Their Company? 15 Company and Securities Law Journal 434 Campbell I, (1960) Contracts with Companies, 76 Law Quarterly Review 115 Crosling. G. M., and Murphy, H. M., (2009) How to Study Business Law, 4th ed. Australia: Butterworths Pentony. B., Graw, S., Lennard, J., and Parker, D., (2014) Understanding Business Law, 7th ed. Australia: Lexis Nexis Case Law Adams v Cape Industries plc [1990] Ch 433 DHN Food Distributors Ltd v Tower Hamlets London Borough Council [1976] 1 WLR 852 Eley v Positive Life Assurance Co Ltd [1876] 1 Ex D 88 Hickman v Kent or Romney Marsh Sheep-breeders Association [1915] 1 Ch D 881 Salomon v Salomon Co [1897] AC 22